Dollar firm, yuan slips as China Evergrande anxiety resurfaces

SINGAPORE (Reuters) – The safe-haven dollar found support just below last week’s peaks on Monday as renewed concerns about China’s property sector and looming U.S. labour data put investors in a cautious mood.

FILE PHOTO: An employee counts U.S. dollar bills at a money exchange in central Cairo, Egypt, March 20, 2019. REUTERS/Mohamed Abd El Ghany./File Photo

The greenback scaled a 14-month high on the euro and a 19-month top on the yen last week as markets reckoned U.S. interest rates could rise ahead of global peers.

The euro dipped back below $1.16 and at $1.1598 is not far from last week’s trough at $1.1563. The yen was little changed at 111.065 per dollar. The offshore yuan fell about 0.3%.

Shares in embattled developer China Evergrande were halted in Hong Kong, rekindling market nerves about the possibility of contagion.

Evergrande said it requested a trading halt pending an announcement about a major transaction, while unit Evergrande Property Services Group said the announcement constitutes “a possible general offer for shares of the company.”

Investors are concerned that a collapse at Evergrande could hurt an already fragile Chinese economy and drag on global growth. The U.S. dollar index edged up 0.08% to 94.029.

“(There’s) a bit of nervousness,” said Moh Siong Sim, currency analyst at the Bank of Singapore, even if most traders still think Evergrande’s systemic risk can be contained.

“It’s part of the wall of worry,” he said, which the market could eventually “climb” if the COVID backdrop improves, growth stabilises and inflation concerns subside, but which for now is keeping investor sentiment fairly dour.

Besides Evergrande, a Friday CNBC report which said U.S. Trade Representative Katherine Tai will announce on Monday that China is not complying with U.S.-China trade rules also provided support to the dollar, especially against the yuan.

Chinese markets were closed for a holiday.

In the week ahead, the Reserve Bank of Australia meets on Tuesday and is expected to keep policy steady. Across the Tasman, a 25 basis point hike from the Reserve Bank of New Zealand on Wednesday is priced in.

The Australian dollar was about flat at $0.72685 and the New Zealand dollar was little changed at $0.6941.

On Friday, U.S. labour data is expected to show continued improvement in the job market, with a forecast for 460,000 jobs to have been added in September – enough to keep the Federal Reserve on course to begin tapering before year’s end.

“The question is whether there is a number that alters the Fed’s view on tapering its bond purchases in November, and what a really weak or hot number means amid the backdrop of rising stagflation fears,” said Pepperstone’s head of research, Chris Weston.

“If U.S. Treasuries find further buyers this week into Friday’s U.S. non-farm payrolls, the dollar may go on sale this week.”

Elsewhere economists polled by Reuters expect the cash rate on hold in Australia until at least 2024, as the RBA has been insisting it will be.

Swaps markets show a 97% probability of a rate hike in New Zealand on Wednesday and a 96% chance of another one in November.

Sterling, meanwhile, despite Friday gains, is still nursing losses from a sharp drawdown last week when traders shrugged off hawkish central bank rhetoric to focus on a sour outlook and the risk of both higher rates and inflation.

The pound was about flat from last week at $1.3540.

“Investors are judging the UK by its whole suite of fundamentals factors and movements in sterling suggest that many are not liking what they are seeing,” said Rabobank strategist Jane Foley, as the currency erases early 2021 gains.

“The UK no longer has an advantage on the vaccine front…and, while PM (Boris) Johnson likes to view Brexit as ‘done’, many businesses and commentators are only just starting to evaluate its impact.”

========================================================

Currency bid prices at 0559 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar

$1.1598 $1.1594 +0.03% -5.07% +1.1614 +1.1588

Dollar/Yen

111.0600 111.0300 +0.00% +7.50% +111.1100 +110.9300

Euro/Yen

128.80 128.75 +0.04% +1.48% +128.8600 +128.6800

Dollar/Swiss

0.9305 0.9307 +0.01% +5.21% +0.9311 +0.9293

Sterling/Dollar

1.3539 1.3543 -0.02% -0.89% +1.3577 +1.3534

Dollar/Canadian

1.2627 1.2643 -0.14% -0.86% +1.2654 +1.2614

Aussie/Dollar

0.7269 0.7268 -0.01% -5.53% +0.7283 +0.7250

NZ

Dollar/Dollar 0.6941 0.6943 -0.04% -3.36% +0.6952 +0.6927

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

Source: Read Full Article